October 29, 2011

Continuing his eighth sketchy story, Mr.
Ferrara rails against State-facilitated externalization
or socialization of the cost of doing business. In his attempt to make this a
case against the free market, however, Mr. Ferrara has, as we have seen, summoned
to the witness stand an unrepentant Catholic Fascist. Remarkably,
he then reinforces his argument by quoting the words Charles Dickens put into
the mouth of Ebenezer Scrooge in A
Christmas Carol. You know, where he suggests that the poor repair to the
prisons and workhouses of Victorian England, etc:

Well, I’ll be tougher than the toughies,
and sharper than the sharpies—and I’ll make my money square!

All right, that was Scrooge McDuck.[0] That cartoon character’s lines may be
more irrelevant to the matter at hand than Ebenezer’s, but not much. For the
matter at hand is Mr. Ferrara’s accusation that

. . . it is precisely Scrooge’s reliance on
the State to do what he should do in justice that Austrians defend. (28)

yet Mr. Ferrara does not—because he could not—quote
any Austro-libertarian to the effect that employers either (a) morally owe
their employees certain welfare benefits or (b) should evade that “obligation” by
persuading their employees to join the welfare rolls. The Austrian condemnation
of the welfare state in all its incarnations does not allow for that inference.

Let’s overlook that typical shortcoming,
however, and instead make sure we understand his slander: Austrians allegedly
defend the fictional Scrooge’s reliance on the State (which they want to
dismantle) to do what that fictional miser was allegedly morally obliged to do.

Mr.
Ferrara’s implicit slander that any given capitalist is presumptively a meanie—a
Scrooge—informs the tenor of this section. And he is not finished: here he is merely foreshadowing the chapter
(15) that he will devote to Michael Levin’s
contrarian, pro-market interpretation of Dickens’ classic. Mr.
Ferrara’s slander is not based on evidence we can examine, but rather trades on
the negative emotional charge attaching to “Ebenezer Scrooge” enhanced by (as
we shall see) a poorly documented anecdote. As there’s no real defendant here, no
defense is required.[1]

We wonder why Mr. Ferrara didn’t omit this
appeal to the fictional and instead move directly from Fanfani to one of his favorite
whipping boys, Wal-Mart:

A perfect example of how the “free” market
uses government to “externalize” its operating costs so that it can scrimp on
employee compensation is the declaration by Wal-Mart’s CEO that Wal-Mart
employees without medical coverage should consider public assistance. (28)

Truly horrible. But what does this have to
do with Austro-libertarianism?

Markets, whether “free” or free, don’t use
government. Individuals use government to seek power over other individuals,
and historically the State has served as the convenient facilitator of such
exploitation. We Austro-libertarians don’t think that moral hazard should
exist.

Mr. Ferrara insinuates that the interest of
big business in getting others to pay their costs of doing business was the
prime mover of the rise of the welfare state in America, which would not, of course, explain its earlier rise in
Europe. We agree that the effort to externalize costs was a factor, but hardly the only one. It is certainly not the kind of
explanation that should satisfy a Catholic intellectual. Unless one is
committed to Marxist—or Beardsian, quasi-Marxist—interpretation of
history, one will look for ideological drivers. Murray Rothbard’s “Origins of the Welfare State in America”[2] shows how
much ideology Mr. Ferrara’s economic determinism omits.

The silent, unsupported premise of Mr.
Ferrara’s indictment of Wal-Mart is that “medical coverage” is somehow a morally
necessary part of an employee’s compensation. Mr. Ferrara has not even
attempted to show that it is any more such a part than is a Social Security
“insurance premium.”

Compensation—money paid to “compensate” employees for the leisure they forego when they produce goods or
services their employer prefers to that money—is determined by market forces,
including the supply of and the demand for their particular skill sets. It is also,
as we have argued, a function of the capital
investment that increases the productivity of labor, which in turn increases the
wages or “compensation” that labor can command.

Market forces—not ethical desire or the
imperatives of justice—also determine the production of the goods and services for
which wage earners exchange the money they receive in wages, including health
care insurance. Markets cannot—logically cannot—be blamed for political
interference with markets, which distorts pricing. Let’s eliminate those
complicating, distorting, aggravating political forces.

One form that interference takes is the
mandatory pooling of people who incur greater risks to their health through
their lifestyle choices with those who incur lesser. That is, the same coverage
is offered both to those who don’t eat well and exercise and to those who do.[3]
But to the degree that health is subject to one’s control, to that degree the acquisition
of an adverse health condition is not a poolable risk as is, say, a
catastrophic accident. Yet insurance underwriters get raked over the coals
every time they insist on following the logic of pooled risk rather than that
of welfare benefits.

Such interference has made health care insurance
coverage virtually unaffordable for most people.[4] Many of them conclude, unfortunately,
more emotionally than rationally, that such coverage is not something they must
either (a) pay for themselves or (b) receive as charity from others. It is rather something that is theirs
as a matter of justice, as Mr. Ferrara suggests. This moral imperative does not,
however, immunize companies from the central bank-spawned alternation of boom
and bust, and during the bust, when many of them are forced to cut costs,
including those associated with their compensation packages, healthcare
insurance coverage is vulnerable. Wal-Mart demonstrated that just the other day. But Mr. Ferrara has not
demonstrated that there is any presumptive right to such coverage: so far that’s
just his dogma. As far as we can tell, it is but another form that compensation
has taken historically and can one day cease to take.

If, in fairness to former Wal-Mart CEO Lee
Scott whom Mr. Ferrara seems to quote, you would like to read for yourself what
he said, even what else he may have said immediately before or after his alleged
comparative judgment

“In some of our states, the public program
may actually be a better value with relatively high income limits to qualify
and low premiums” (28-29)

do not look to Mr. Ferrara. He fulfills his
obligation as a propagandist once he has held up his target for mockery, sourcing
only the latter’s adversary: his reference note cites something called wakeupwalmart.com/facts,
but that link does not take one to the transcript of Mr. Scott’s speech
mentioned in Mr. Ferrara’s note. (331 n. 51) Rather, it redirects to the site
of the United Food and Commercial Workers International Union.

If fact, do not bother to look anywhere for the origin of those words, which seem to reproduce themselves,
meme-like, across the Internet. On the Wiki article on criticism of Wal-Mart one can
find a contemporary source for this alleged speech-fragment, but its linked reference,
Susan Bucher’s impartially titled study, “Walmart: the $288 billion welfare
queen,” Tallahassee Democrat, April
19, 2005, also redirects to that union site.

In short, Mr. Ferrara’s “perfect example”
is an anecdote, from which nothing may be reliably inferred.

For the sake of argument, however, let’s assume
that Mr. Scott said what he is quoted as saying and that it fairly represents his
attitude toward the “public program,” i.e., the welfare rolls. Let’s also
assume the veracity of the facts Mr. Ferrara appended to Mr. Scott’s words:

And this from a company whose CEO earns
more than $25 million annually and whose founding family is worth more than $80
billion collectively thank to the labor of the “sales associates” Wal-Mart
declines to provide with medical coverage . . . . (29)

The undefended implicit premise here seems
to be: “And employers who are worth that much and pay their officers that much ought
to pay larger compensation packages than those mutually agreed upon.” But that “ought”
begs the question.

While corporations are externalizing these
operating costs [Mr. Ferrara writes], wage earners are paying for them almost
entirely. In fiscal year 2008, for example, federal personal income taxes and
payroll taxes combined represented 81% of federal tax revenues, while the
corporate tax represented only 12%. (29)

Tax avoidance is everyone’s game, however,
and we should not be surprised that those with more money and power will be
better at protecting their money from the taxman than those with less. So, in
the interest of equity as well as justice, let’s abolish all such systems by which the few loot the many and find a more intelligent way to pay for socially necessary goods and services. Let's try free markets.

On this very point, we are pleased to note partial agreement between Mr. Ferrara
and ourselves. After imputing another silly “panic button” to us (“So, you want to soak the corporations?”), he “replies”:

. . . this is not an argument for increased
corporate taxation. Rather, it is an argument for abolition of the personal income tax and the federal corporate income tax . . . (29)

Actually, we haven’t seen much of an argument at all, but if Mr. Ferrara wishes
to number himself among the tax abolitionists, however, we will take him at his
word. But then he drops the other shoe. (Same sentence; take a deep breath.)

. . . followed by payment of just wages and
benefits to employees in the Catholic spirit of commerce, along with privatized
retirement plans and public provision only for those truly in need, and then
only at the local level. (29)

Hmmm.
How will that be paid for? He will attempt an argument for this opinion
later, but here it is a gratuitous, question-begging assertion, meriting only gratuitous
denial.

* * *

The rest of his sketch concerns the role of
big business in the creation of the welfare state and its infamous socialistic “programs,”
an involvement we lament and deplore, but to the origin of which
there was much more by way of ideological inspiration than he shows any awareness of or interest in.[5] We do, however, question what this
indictment of “the Keynesian model of the managed economy,” as he refers to it,
has to do with the defense of free markets, hampered as they are by the implementation of that
model. He tops off his narrative with this flourish:

. . . every single Western nation today . .
. combines a “free” market of privileged corporations with government
assistance programs by which corporate costs for employees are externalized. “We’re
all Keynesians now,” as Milton Friedman has famously observed. (29)[6]

But he has not shown that they are
necessarily “corporate costs” at all. They are simply various goods and
services (e.g., “social security” financed by a Ponzi scheme) that people demand
through the political system, which large corporations effectively control. The
latter warrants the aim of abolishing, not the corporate form of organization,
but rather the State.

As for his use of Friedman, Mr. Ferrara’s
source for his words is not the December 31, 1965 issue of Time magazine where they first appeared, rather (once again) a book
by his economics control, John Médaille. (331 n. 53) The latter author,
however, merely reproduces the fragment
of Friedman’s words that President Nixon echoed when he closed the U.S. “gold
window” in 1971. Words “as quoted” by Médaille, however, is apparently good enough for Mr. Ferrara. We have seen how unreliable that can be.
Let’s explore that defect in this instance.

Mr. Médaille wrote: “The conservative economist Milton
Friedman somewhat impishly suggested “We’re all Keynesians now!” (The Vocation of Business, 79). If the
following qualified remark by the late dean of the Chicago School of Economics
sounds like an impish suggestion to our readers’ literary ears, then perhaps
something is wrong with ours:

In one sense we are all Keynesians now; in
another, no one is a Keynesian any longer. We all use the Keynesian language
and apparatus; none of us any longer accepts the initial Keynesian conclusions.

As for Mr. Médaille’s political characterization of Friedman:

In 1994 Milton Friedman wrote a letter to Policy Review to complain that the
magazine, then published by the Heritage Foundation, had inaccurately described
his mentor and friend F.A. Hayek as a conservative. Noting that Hayek had
included a postscript in his classic work of political philosophy, The Constitution of Liberty, explaining “Why
I Am Not a Conservative,” Friedman said, “Hayek, to the best of my belief, like myself, always considered himself a
‘Whig’—a 19th century liberal, never a conservative.” Policy Review's editor, Adam Meyerson, was unfazed. Not only was
Hayek a conservative, he told Friedman, but “you are a conservative, too.
Sorry.”

We never said Mr. Ferrara is the first practitioner of the art of persistent misquotation and mischaracterization.

[0] Brother to Viennese polymath Ludwig von Drake. (Hat tip to Dave Rogers.)[1] Mr. Ferrara once before treated us to his sophomoric
use of the novelist when he referred to Albert Jay Nock’s unfortunate reliance
on Dickens’ Hard Times to express
disapproval of the enclosure of the English commons.

[2] The
text of a paper Rothbard delivered at
the Mises Institute's “Evils of the Welfare State” conference, Lake Bluff,
Illinois, April 30—May 2, 1993.

[3] As Hans-Hermann Hoppe tersely put it: “Subsidies for the ill and diseased
breed illness and disease, and promote carelessness, indigence, and dependency.
If we eliminate them, we would strengthen the will to live healthy lives and to
work for a living.”

[4] For excellent reading material on the topic of free-market health care, see the
list Tom Woods compiled for a recent post.

[5] “J. Douglas Brown was head of
Princeton's IRC-created Industrial Relations Department, and was the point man
for the CES [FDR’s Rockefeller-dominated Committee on Economic Security.—A.F.] in
designing the old-age pension plan for Social Security. Brown, along with the
big-business members of the Advisory Council, was particularly adamant that no
employers escape the taxes for the old-age pension scheme. Brown was frankly
concerned that small business not escape the cost-raising consequences of these
social security tax obligation. In this way, big businesses, who were already voluntarily providing costly old-age
pensions to their employees, could use the federal government to force their
small-business competitors into paying for similar, costly, programs. Thus,
Brown explained, in his testimony before the Senate Finance Committee in 1935,
that the great boon of the employer “contribution” to old age pensions is that
it makes uniform throughout industry a minimum cost of providing old-age
security and protects the more liberal employer now providing pensions from the
competition of the employer who otherwise fires the old person without a
pension when superannuated. It levels up cost of old-age protection on both the
progressive employer and the unprogressive employer.” Rothbard, op. cit. Our emphasis.

[6] Mr. Ferrara’s grammar is as good as his
scholarship. Reference in 2010 to someone’s “observing” something in 1965
should be expressed in the simple past tense.

Tom also wants readers to know that “I didn’t
come up with the title; always give authors the benefit of the doubt on that
and assume the editors title their articles.”

Don’t Mix the Ecclesiastical with the
Economical

Thomas E. Woods

The Vatican’s Pontifical Council for Justice and Peace released a
document Monday, calling for a world economic authority and condemning the “idolatry
of the market.”

It’s a document that could have been written by any number of secular
U.S. think tanks. It is also deeply confused.

On the one hand, it speaks of excessive money growth as a problem that
can lead to dangerous “speculative bubbles.” On the other, it calls for a world
economic authority that will . . . what? Be exempt from the errors and hubris
of government officials and national central banks?

We were assured that the best and the brightest were running the Fed.
These were people who told us the rise in housing prices was attributable to
strong fundamentals. Alan Greenspan told people to take out adjustable-rate
mortgages. Ben Bernanke said in 2006 that lending standards were sound. And so
on.

Whenever rising interest rates might have discouraged crazed speculation
in real estate, the Fed kept the mania going by maintaining low rates. When the
market was trying to send us red lights, in other words, the Fed was turning
them all green.

Had we really been engaged in “idolatry of the market,” we might have
listened to the market. Instead, the central authorities drowned out what the
market was trying to tell us.

It’s been idolatry not of the market but of central banks, the
institutionalized sources of moral hazard and financial instability around the
world. (The aura of infallibility and the cult of personality surrounding Fed
chairmen make the language of idolatry more than mere poetic license.)

The widespread misdiagnosis of the crisis now engulfing us has led to
the frequent claim that lax regulation, or deregulation, must have caused it,
and that better supervision of the system can prevent future crises. This is a
delusion, albeit a common one.

In the United States we saw a significant increase in staffing for the
115 agencies that regulate the financial sector, as well as a threefold
(inflation-adjusted) increase in funding for financial regulation since 1980.
There is no repealed regulation that would have prevented the crisis consuming
the world right now.

The present malaise does not call for another layer of supervision, as
the Pontifical Council appears to think. It calls for a serious moral and
economic re-evaluation of institutions, among them central banking (and fiat
money), that we have long taken for granted.

The last thing we need is a larger, more centralized version of what we
have now. Our problem isn’t greedy people or bad personnel; every society and
every period of world history have had those. The problem is the system itself.

What we need is a genuinely free economy, one not subject to the
cronyism and manipulation at the heart of the present system, and one that’s
free of the central bank.

We’ve been assured that the central bank has found a shortcut to
prosperity by managing the economy with its highly touted macro tools and by
second-guessing the interest rates to which the free interactions of
individuals give rise. The result has been bubble after bubble and — contrary to
popular belief — far more banking, currency crises and overall instability than
was ever seen in the oft-misunderstood era that preceded the age of central
banking.

The Vatican document reflects a vague sense of what is wrong, but any
solution that involves reposing our confidence in still another layer of
time-serving drones supervising a largely unchanged system is no real solution
at all.

October 21, 2011

Amintore Fanfani, the star of yesterday’s post,
makes another appearance in TCATL in Mr. Ferrara’s eighth historical sketch, this
time by name. We will get to him presently.

8. Corporate cost
externalization: the “nanny state.”

Here he exposes the alleged hypocrisy (or perhaps
merely the inability to remember “from one moment to the next”) of
Austro-libertarians who rail against the welfare-warfare state “while failing
to mention the role of corporations in its emergence and persistence.” (28)

By now you probably know how this goes: first,
the overgeneralization dressed in scare quotes followed by a mélange of extraneous matters, each of
which needing a reply (which, as you should also know by now, each one will get,
but in due course):

Under the corporate status quo of our “free”
market society, which institutionally rejects the Catholic concept of the just
or living wage (see Chapter 12), corporations
are able to “externalize” onto government (i.e., the taxpayer) not only transportation
costs, as discussed above, but also the costs of supporting wage-dependent
employees, including health and retirement benefits. (28)

The salient “failure to mention” here is
Mr. Ferrara’s, whose yellow journalism overlooks Murray Rothbard, for his exposure of this very externalization (why the scare quotes?) was a major theme of his scholarly career. Here is a sample of his thought on this matter:

Under cover of the Civil War, then, the
Lincoln Administration pushed through the following radical economic changes: a
high protective tariff on imports; high federal excise taxes on liquor and
tobacco (which they regarded as “sin taxes”); massive subsidies to newly
established transcontinental railroads, in money per mile of construction and
in enormous grants of land all this fueled by a system of naked corruption;
federal income tax; the abolition of the gold standard and the issue of
irredeemable fiat money (“greenbacks”) to pay for the war effort; and a
quasi-nationalization of the previous relatively free banking system, in the
form of the National Banking System established in acts of 1863 and 1864.

In this way, the system of minimal
government, free trade, no excise taxes, a gold standard, and more or less free
banking of the 1840s and 1850s was replaced by its opposite. And these changes
were largely permanent. The tariffs and excise taxes remained; the orgy of
subsidies to uneconomic and overbuilt transcontinental railroads was ended only
with their collapse in the Panic of 1873, but the effects lingered on in the
secular decline of the railroads during the 20th century. . . .

The chief architect of this system was Jay
Cooke, long-time financial patron of the corrupt career of Republican Ohio
politician Salmon P. Chase. When Chase became Secretary of the Treasury under
Lincoln, he promptly appointed his patron Cooke monopoly underwriter of all
government bonds issued during the war. Cook, who became a multi-millionaire
investment banker from this monopoly grant and became dubbed “the Tycoon,” added
greatly to his boodle by lobbying for the National Banking Act, which provided
a built-in market for his bonds, since the national banks could inflate credit
by multiple amounts on top of the bonds. (“Government-Business ‘Partnerships,’”
as it appears in Rothbard, Making
Economic Sense, Second Edition, 2006, Ludwig von Mises Institute, 190-192)

The article concludes:

The northeastern Republican Establishment
is still cartelizing, controlling, regulating, handing out contracts to
business favorites, and bailing out beloved crooks and losers. It is still playing
the old “partnership” game—and still, of course, at our expense. (Ibid., 192.)*

Rothbard’s remedy, of course, was the
opposite of Mr. Ferrara’s “freedom through moral restraint” program. It
was rather to free markets from the State
by reducing and ultimately abolishing the latter. Upon reading this
correction of his account of the Austro-libertarian position, will Mr. Ferrara humbly
bleat, “Oh. Never mind,” à laEmily Litella? To ask is to answer.

As it becomes clearer with each page that Mr. Ferrara intends to offer only more fallacy-infected, anti-capitalist
litanies, we will take the occasion they provide to push the antithesis between
his viewpoint and ours. Mr. Ferrara’s literary authorities are clues to the
affinities that his Distributism bears to one form or another socialism, be it corporatism, guildism, democratic industrial organization, or, we now see in
the case of Amintore Fanfani, Fascism. It is germane to the purpose of this
blog to point them out.

NB: We are aware of Mr. Ferrara’s formal denial
of socialism, if no other reason than that Pope
Pius XI declared in Quadrogesimo Anno that
“No one can be at the same time a sincere Catholic and a true socialist.” Mr.
Ferrara is nothing if not a sincere Catholic. Since, however, his criticisms display
the same economic ignorance that distinguishes franker socialists, draped
in the same historical romance, then his denial rings hollow. Now, to Fanfani.

The renowned Italian economist Amintore
Fanfani, who served as Prime Minister of Italy and President of the United
Nations General Assembly, summarized, this truth about capitalism thus: “The
State, by carrying out public works in a capitalist-liberal régime, lessens the
risks of producers, andlamost plays the part of an insurance system.” (28)

We postpone a
discussion of the tendentious description “this truth about capitalism.”

Readers had to wait
until Mr. Ferrara quoted Fanfani a second time to get an insight into the
meaning of this appeal to authority. Just why did Mr. Ferrara cite him? Because
he was a scholar, a specialist in economic history, who taught at the
Universities or Milan and Venice? Mr. Ferrara never mentions those
achievements. Mr. Ferrara doesn’t even tell us that Fanfani was a Catholic, arguably relevant to Mr.
Ferrara’s purposes in the book under scrutiny. Does he believe that “Amintore Fanfani” is a household name, like, for example, “Abraham
Lincoln,” in which case further denotation would insult the reader? We learn a bit of Fanfani’s post-war career but not why we should pay
heed to the utterances of Italian Prime Ministers or Presidents of the U.N. General Assembly.

Most remarkably, he doesn’t mention Fanfani’s
career as a fascisto-Catholic theoretician (before he reinvented himself as a center-left
Christian Democrat), outlined in our previous post.** Remarkably, we say, for in the
21st century one does not responsibly quote such a figure without also distancing
himself from that political commitment. One does both especially if one is
a Catholic—unless, of course, one is attracted to aspects of Italian fascism. We’re
anarcho-Catholics. If one is a fascisto-Catholic, one should step up to the
microphone and say so rather than hope no one will notice that he’s quoting an
earlier fascisto-Catholic. If one is not, then one should take pains to ensure
that no one draws that fateful inference from one's words.

Now this blog is
about TCATL, not Fanfani, but let’s take advantage of the present opportunity. As
Fanfani was a scholar, a note on his contribution to the current state of economics
education is germane.

For light on the
roots of one of Fanfani’s ideas, we once again turn to Murray Rothbard, this
time his magisterial Austrian History of
Economic Thought. In the following passage he traced several symptoms of the
economic ignorance on display in TCATL to 14th-century theologian and mathematician
Heinrich von Langenstein the Elder, who was
plucked from obscurity by a couple of scholars who unfortunately latched onto,
not his expertise in divinity or math, but his economic notions.

In his usual
entertaining way, Rothbard exposed the ageless rationale for the intervention
known as price-fixing—the desirability of maintaining one’s station in life, draped
in moralizing solicitude for the poor. Elements of 20th-century corporatism
and guildism are discernible. Rothbard shows the power of ideas, especially bad
ones, to influence scientific inquiry for centuries.

The
Doctrines of One Obscure and Heterodox Scholastic***

Murray
Rothbard

One nominalist and student of [Jean] Buridan, Heinrich von
Langenstein the Elder (also known as Henry of Hesse) (1325–1397), while an
uninfluential and minor scholastic philosopher in his own and later centuries,
made great mischief for modern interpretations of the history of economic thought.
Langenstein, who taught first at the University of Paris and then at Vienna,
began in hisTreatise on Contractsby analyzing the just price in the
mainstream scholastic manner: just price is the market price, which is a rough
measure of the human needs of consumers. This price will be the outcome of
individuals” calculations about their wants and values, and these in turn will
be affected by the relative lack or abundance of supply, as well as by the
scarcity or abundance of buyers.

Having said this, Langenstein proceeded to contradict himself
completely. In a highly unfortunate contribution to the history of economic
thought, Langenstein urged local government authorities to step in and fix
prices. Price fixing would somehow be a better path to the just price than the
interplay of the market. Other scholastics had not exactly opposed price
fixing; for them, the market price was just whether it was set by the common
estimate of the market or by the government. But it was at least implicit in
their writings that the free market was a better (or at the very least an
equally good) path to discovering the just price. Langenstein was unique in
positively advocating government price fixing.

Moreover, Langenstein added another economic heresy. He
counseled the authorities to fix the price so that each seller, whether
merchant or craftsman, could maintain his status or station in life in the
society. The just price was the price which maintained everyone's position in
the style to which he had become accustomed — no more and no less. If a seller
tried to charge a price to advance beyond his station, he was guilty of the sin
of avarice.

Langenstein was the odd man out among the scholastics and
late medieval thinkers. No one has been found to second the “station in life”
concept of the just price. Indeed St Thomas Aquinas himself effectively
demolished this view when he trenchantly declared

In a just
exchange the medium does not vary with the social position of the persons
involved, but only with regard to the quantity of the goods. For instance,
whoever buys a thing must pay what the thing is worth whether he buys from a
pauper or a rich man.

In short, on the market prices are the same to all, rich or
poor, and furthermore this is a just method of establishing prices. In the
bizarre Langenstein view, of course, a wealthy seller of the same product would
be obliged to sell it for a far higher price than a poor seller, in which case
it is unlikely that the wealthy man would last long in the business.

As far as can be determined, no medieval or renaissance
thinker adopted the station-in-life theory, and only two followers adopted the
price-fixing position. One was Matthew of Cracow (c. 1335–1410), professor of
theology at Prague and later rector at the University of Heidelberg and
archbishop of Worms, and particularly Jean de Gerson (1363–1429), nominalist
and French mystic who was chancellor of the University of Paris. Gerson,
however, ignored the station-in-life notion and reverted to the 13th-century
view of John Duns Scotus that the just price is the cost of production plus
compensation for labor and risk incurred by the supplier. Gerson therefore
urged that the government fix prices to force them to conform to the allegedly
just price. Indeed, Gerson was a fanatic on price fixing, advocating that it be
extended from its customary sphere in wheat, bread, meat, wine and beer, to
embrace all commodities whatsoever. Fortunately, Gerson's view also had little
influence.

Von Langenstein was scarcely important in his own or at a
later day; his great importance is solely that he was plucked out of
well-deserved obscurity by late-19th-century socialist and state-corporatist
historians, who used his station-in-life fatuity to conjure up a totally
distorted vision of the Catholic Middle Ages. That era, so the myth ran, was
solely governed by the view that each man can only charge the just price to
maintain him in his presumably divinely appointed station in life. In that way,
these historians glorified a nonexistent society of status in which each person
and group found himself in a harmonious hierarchical structure, undisturbed by
market relations or capitalist greed. This nonsensical view of the Middle Ages
and of scholastic doctrine was first propounded by German socialist and state
corporatist historians Wilhelm Roscher and Werner Sombart in the late 19th
century, and it was then seized upon by such influential writers as the
Anglican Socialist Richard Henry Tawney and the Catholic corporatist scholar
and politician Amintore Fanfani. Finally, this view, based only on the
doctrines of one obscure and heterodox scholastic, was enshrined in
conventional histories of economic thought, where it was seconded by the free
market but fanatically anti-Catholic economist Frank Knight and his followers
in the now highly influential Chicago School.

The much-needed corrective to the older view has at last
become dominant since World War II, led by the enormous prestige of Joseph
Schumpeter and by the definitive research of Raymond de Roover.

How irenic of Rothbard to describe Fanfani so
politely and how interesting that Mr. Fanfani’s partner in this intellectual
escapade was the Anglican Socialist Tawney, whom Mr. Ferrara has drawn upon, as
we saw last April.

To Be Continued

* “. . . what does one do with the legion
of pro-New Deal, -Fair Deal, -Great Society big businessmen: the Paul Hoffmans,
the Averell Harrimans, the Rockefeller brothers? Neither the liberal
explanation that these were unusually ‘enlightened’ or ‘intelligent’ sports,
nor the conservative psycho-smear that they were brainwashed into feeling
guilty about their wealth by liberal prep-school teachers, was particularly
compelling. Especially when everyone knew that such government intervention as
tariffs or import quotas on steel, for instance, were lobbied for, neither by
altruists nor by the brainwashed guilt-ridden, but by steel manufacturers
anxious to secure their profits from more efficient foreign competition.”
Rothbard, “The Business-Government Alliance,” Inquiry, January 1983, republished here.

** In his Machiavelli’s Children: Leaders and Their Legacies in Italy and Japan (Cornell
University Press, 2005), Richard J.
Samuels reveals facts about Mr. Ferrara’s expert that in turn raise disturbing
questions about Mr. Ferrara’s use of him, questions he neither anticipates nor
answers.

The Christian doctrine of “voluntarism” was
his [Fanfani’s] connection to fascism. On this view, the economy is subordinate
to politics, and politics is subordinate to Christian morality. . . .
Corporatism was a fundamentally reactionary “third way” between capitalism and
communism that suited Catholics and fascists alike. 250

Although his central concern was social
justice, he was not beyond nationalist sentiment. Fanfani celebrated Italian
imperialism in Ethiopia, for bringing “Roman virtue combined with Christian
consecration” to Ethiopia. He praised Mussolini, whom he called “the conqueror
of all in the struggle for civilization,” for inculcating a new patriotism
among youth and for raising Italy’s stature abroad. . . . In 1937 he wrote that
he did not consider fascism a form of tyranny because it limited “only the
noxious and dysfunctional liberties.” Totalitarianism, he argued, was acceptable
because it organized the inequalities among citizens for desirable collective
ends and subordinated rights to duties.” 250

Fanfani continued to write of its [Fascism’s]
virtues as late as 1942, arguing that it had succeeded traditional corporatism
with its powerful ideas for “organic reconstruction of society and cross-class
cooperation.” At this point Fanfani was convinced that fascist corporatism
echoed the moral teachings of the Catholic Church, a “coincidence [that] should
not serve to diminish the originality and merit of fascist corporatism, but [that]
should demonstrate the profound sense of justice that animates the new [fascist]
doctrine.” 251.

Fanfani had been attracted to fascism in
part because fascist corporatism was consistent with Catholic social doctrine
and in part because fascism was politically dominant. He reinvented himself as
a center-left Christian Democrat at a time when democracy had become the only means
to realize his social doctrine or to achieve political power. 252.

October 20, 2011

Before examining Mr. Ferrara’s seventh historical
“sketch,” we urge upon our visitors Stephan Kinsella’s recent (October 18) and
extensive answer to those who, like Mr. Ferrara, Kevin Carson, Joel Bakan, et
al., seem to regard the notion of corporate personhood as the root of all
modern evil, which we addressed in recent posts. It is entitled, “Corporate Personhood, Limited Liability, and Double
Taxation.” A lively discussion with Mr. Kinsella follows in
the combox.

* * *

The next sketch under review, reproduced
below, continues Mr. Ferrara’s by-now boring recitation of historical examples
of some capitalists seeking and winning governmentally granted privileges,
subsidies, and other non-market advantages over their market rivals—as though such
stories bore on the Catholic reception of Austro-libertarianism, i.e.:

7. The use of State power to impose the
legal and social uniformity required for “efficient” large-scale commerce (27)

to which our by-now equally boring response
is that such episodes only reinforce our case for ethically regarding the State—no
matter how “constitutionally limited,” no matter how “small” by today’s measure—as
an unacceptable moral hazard.* Here’s the latest laundry list:

Capitalists were instrumental in achieving
State-imposed uniform legal codes and weights and measures, the abolition of
the guilds and other intermediary social bodies, the repeal of the Sunday
closing laws and legal religious holidays, the repeal of laws against usury,
and a host of other State-imposed “reforms” that cleared away all the underbrush
in the once Christian socioeconomic landscape that had interfered with the
business of buying cheap and selling dear over as large a territory as
possible. Capitalism thus achieved, through the exercise of State power, “still
greater advantages from being able to expand over the wide territories of a
State in which the feudal substructures were demolished one by one.” (27-28)

Our first reaction to this was, “So, for
crying out loud, work to abolish the State instead of trying to influence it!”
Taking these items on a case-by-case basis, we notice problems that the market solves
when it is free to (e.g., standards), and others that are not problems at all
(“usury,” to which we will return in future posts). The generalization “were
instrumental in achieving” is a template of conceptual laziness that dilutes
any content poured into it. If Mr. Ferrara laments the passing of “feudal
substructures” (along with their intertwining royal and papal intrigues), or prefers
buying dear and selling cheap to the alternative arrangement, he should step up
to the microphone and remove any doubt.

Our second reaction was based on what we
found in the reference note appended to the concluding quote, whose author is not
identified in the main text. We were surprised, at least initially, to see his
nonchalant reference to Fanfani’s Catholicism,
Protestantism, and Capitalism, an erudite anti-capitalist tome that should give
its readers, especially Catholics among them, a whiff of the ideological
hothouse within which early 20th-century anti-capitalism grew.**

Mr. Ferrara’s note gives the uninformed reader
the impression that Catholicism,
Protestantism, and Capitalism is a new book, as it bears a publication date
of 2005 and the imprint of IHS Press, a pro-“Catholic Social Thought” outfit after Mr. Ferrara’s own heart. In the next sketchy
story he obscures more than identifies Fanfani, but
let’s not get ahead of ourselves.

At the Cattolica del Sacro Cuore, which he
graduated from in 1932, Fanfani wrote a thesis that was published three years
later as Cattolicismo e Protestantismo
nella formazione storica del capitalismo, also published in the United
States by Sheed & Ward as Catholicism,
Protestantism, and Capitalism. So this is not a new book.

The ‘30s were a busy time for Signore
Fanfani. In 1935, the year this Fascist Party member’s first book was published
(while Mussolini’s “imperial” troops were mustard-gassing Haile Selassie’s), he
found regular outlet for his literary production in a magazine with the
charming title La Difesa della Raza (The Defense of the Race). Since we are in an inflammatory mood, we
reproduce a few covers:

Furthering the goals of its movers and
shakers was a “Manifesto
della razza,” which many public figures and academics,
including our devout Catholic social scientist, signed. The Manifesto quickly metamorphosed
into a law in July 1938 that deprived Italian Jews of their citizenship, thereby
provoking the displeasure of Pope Pius XII with equal alacrity.

In short, to say that Amintore Fanfani was
a Fascist is not to engage in leftist name-calling. According to the July 14,
1958 issue of Time magazine,
Fanfani “once wrote” that

the European continent will be organized
into a vast supranational area guided by Italy and Germany. Those areas will
take authoritarian governments and synchronize their constitutions with Fascist
principles.

“Once” was probably fifteen to twenty years
earlier. Certainly no Italian dreamt such dreams after July 25, 1943,
the day King Victor Emmanuel III had Mussolini arrested, a month and a half
before Italy’s surrender to the Allies. Signore Fanfani was probably not even
in town at the time: having been drafted into the service of the lost cause of that
grand synchronization, he fled to Switzerland to teach Italian expatriates and conceptually alchemize his fascisto-Catholic or "corporatist" ideology as “Christian Democracy.” This
former Fascist cheerleader, who continued to expound Fascist principles as late as
1942, when his anthology Il Significato
del corporativismo appeared, reinvented himself as Catholic Prime Minister of post-war Italy five times (not to mention numerous other governmental posts).

Mr. Ferrara didn't think any of this was worth bringing to his readers' attention.

To Be Continued

* Catholics wary of drawing that
anti-state, i.e., anarchistic, conclusion should remember that man’s fallen
nature and the nature of the State as the territorial monopolist of the means
of violence form a fateful combination. It is just because "men are not angels" that they should not be trusted to exercise that monopoly. We anarcho-Catholics are happy to have a
discussion about how social order is to be maintained in the absence of such a
monopoly. We only ask that those who see it as indispensable to such maintenance entertain our skepticism for an evening. We remind them the State does not
“abuse” its power the way a bad parent abuses his or her parental authority or
a bishop his episcopal. As a network of interpersonal relations, the State is
constituted and sustained by aggression, the initiation of violence against
persons and their property. It is intrinsically, not accidentally, a
rights-violating agency. The monopoly it enjoys in the provision of defense,
police, and judicial services only underscores the State’s constitutional
instability and the incoherence attaching to “the State” as a summary term for
such diverse activities as taxation, defense, and ensuring the
delivery of mail.

** Ironically, Murray Rothbard prepared a
brief report bearing that same title, dated
August 8, 1957, for the Volker Fund. Its content should be of interest to
followers of this blog.

October 12, 2011

is surreal in its virtual repetition of Murray
Rothbard’s case against government subsidies to corporations without "connecting
to the dots" for the reader who wants to know how this undermines
the Austro-libertarian defense of the free market. One would think it tends to exonerate Austro-libertarians of the Carsonian charge of vulgarity.

When given the opportunity, no Austro-libertarian fails to condemn such subsidies on the explicitly Rothbardian grounds Mr.
Ferrara adduces. He then delivers this revelation:

Without government-subsidized
transportation systems, the modern “free” market could never have developed as
it did nor continue to function as it does. (27)

And Rothbardians, those “vulgar
libertarians” who have created almost a cottage-industry of historical revisionism
regarding the career of Lincoln the Corporate Railroad Lawyer, join Mr. Ferrara
in condemning anything that interferes with free markets.

What we wait in vain for Mr. Ferrara to
acknowledge, however, is the significance of the reality of persons who generally seek mutually
agreeable terms of trade even if they also irrationally pursue opportunities to cheat
and plunder each other. We acknowledge both sets of facts, while affirming the eminent
reality of free markets, a reality that asserts itself through the major and
minor distortions, betrayals, and perversions committed by every kind of market
player, rich and not-so-rich.* The freedom is exercised in spite of
the subsidies.

Mr. Ferrara doesn’t need more than these
three paragraphs, however, to display once again his already well-documented penchant
for misdirection:

Even Rothbard notes that the railroad
companies “received vast subsidies of land from the government: not only
rights-of-way for their roads, but fifteen-mile tracts on either side of the
line.” Through federal, state and local government land grants and outright
land seizures by eminent domain as authorized by the “takings clause” of the
Fifth Amendment, tort law exemptions that insulated railroads from damages
liability, the issuance of government railway bonds, the use of tax dollars to
construct and maintain interstate highways,
and numerous other government favors, it is the State—not the “free” market—that
has “built an artificial ecosystem to which large-scale, mass-production
industry was best ‘adapted’” while small local firms were fatally disadvantaged
by new, government-subsidized economies of scale.

This was only part of the process by which “the
growth of big government continued to parallel that of big business, introducing
newer and larger-scale forms of political intervention . . . to insulate the
giant corporation from the market forces that would otherwise have destroyed
it.”

To his credit, Mr. Ferrara quotes approvingly and accurately from Murray
Rothbard’s Power
and Market—perhaps the most hardcore anarchocapitalist economics
textbook ever written—but then unfortunately creates the impression that his next
two quotes are from the same source. In fact they are from The Homebrew Industrial Revolutionby
Carson the Accuser, a fact discovered only in the reference notes.** Rothbard's position on large-scale or small-scale industry is not quoted. We cannot recall where he has ever written on it. That aside, why would
Mr. Ferrara not make it clear that the "Pope" of the Vulgar Libertarian
Church and Carson are on the same page when it comes to the free market and anti-market government subsidies? Would such forthrightness undermine his propagandistic purpose?

* We acknowledge both sets, but do not equate them ontologically: distortions, perversions, and betrayals are dependent, even parasitic, upon what they distort, pervert, and betray. Wealth, to be looted, must first be produced.

** Mr. Ferrara’s ellipsis obscures Mr.
Carson’s phrase, “to address the corporate economy's increasing tendencies
toward destabilization,” which omission suggests that perhaps even Mr. Ferrara is
uncertain about whether there is such a thing as a “corporate economy.” There is certainly such a thing as an economy progressively destabilized by governmental interference.

October 10, 2011

Toward
the end of his fifth sketchy story, Mr. Ferrara declares rather arbitrarily
that

Whatever good corporations have done in the relentless
pursuit of their own ends is not the result of the corporate form as such,
which invites and protects a thousand abuses. (26)

One
would think that the corporate pooling of capital bears some causal
relationship to the good of higher living standards, itself an effect of the greater
productivity that that pooling makes possible. Not a word about that, of
course.

The
unlimited liability corporation—the sole
logical alternative to the LLC Mr. Ferrara reviles—would be formed only rarely,
if ever, for few investors would care to put not only their own well-being but also that
of their families at risk just because they went into business with others.

Since
Mr. Ferrara brought up the topic of abuse, we remind him that the Catholic
Church seeks that corporate form of protection so that liability for millstone-meriting
abuse committed by some of its officers is confined to corporation assets and does
not ensnare every Catholic who ever donated money to Her.

If what bothers Mr. Ferrara is an organizational form
that “invites and protects a thousand abuses,”
then he should direct his animus against the state as such, whose income stream
is predicated on a squishy reading of the Eighth Commandment. The state is a moral hazard, if there ever
was one. If one does not like the partnership between the taxing state, which
is intrinsically rights-violating, and limited liability corporation, which is
only accidentally so, it is not rational to abolish the latter in favor of the
former. Or at least we’d like to see an argument for that preference.

Mr.
Ferrara should consider that if there were no attractive helm of state for them
to influence or seize, all LLCs would
be utterly exposed to the rigors of the free market with no Sugar Daddy Fed to
bail them out should they fail. There would, for example, be no non-market regulatory
burdens and taxes at all, let alone of a magnitude that only the biggest market
players can afford to comply with and pay. But if those barriers to market
entry were lifted, “expiration dates” on the dominance of those larger firms
would begin to materialize on their backsides.

Anarcho-Catholics
join Mr. Ferrara in supporting the separation of corporation and state. We part
company, however, over the probability of success as long while the state
exists. There was never a time when the wealthy and the powerful did not form a
symbiotic relationship, with members of each group morphing into members of the
other, perverting both into social parasites. If anyone is more hopeful about
the future on this score, we’d like to understand their reasons.

People
who, like Mr. Ferrara, claim to favor genuinely free markets, as distinct from today’s
hampered markets, should join our effort to “hamper the hamperer” and, frankly,
phase it out. For as small as it was a century ago (in comparison to today),
the Federal Government was not then so small as to be overlooked by the financiers
who conspired to form the Federal Reserve System, a story that Mr. Ferrara will
tell more or less accurately in his tenth sketch—and then, like the drunk who, sick
after ten consecutive cocktails, swears, “That’s it! No more ice for me!,”
fails to draw the anti-statist moral therefrom.

If
certain large LLCs that benefit from the State are the mainstay of the State, then
they will never keep their mitts off it. And they will resist with all their
might the formation of any State they do not control. The only remedy, as we
see it, is cold turkey: “No more State for you guys . . . ever!”

We
must also remember that the State is effectively an LLC—“on steroids,” so to
speak: it is a Hellmouth that recognizes no limits to its appetites. In the end,
however, it is but a configuration of imperfect men, one which other imperfect
men can, and will, disband once they set their mind to it.

Mr. Ferrara closes this section with an
hypothesis about the moral breakdown in society, one that cannot wait for the appropriate
time and place for hypothetical expression:

The publicly held corporation thus involves the same morally deadly
disjunction between “public” and “private” morality exhibited by the secular
State of political modernity—the disjunction that underlies the Austro-libertarian
“ethics of liberty” and post-Enlightenment.

The corporation and the “free” market, as the Austrians call
it, are perfect together. In one sense the “free” market of corporate activity,
which has never been without its coercive partner, the secular State, is indeed
free: free from all moral constraint, as any viewing of television for a few
house will demonstrate with sickening impact. (26-27)

Still in his arbitrary mode, Mr. Ferrara
just asserts that that disjunction is “morally deadly” without specifying the
fatal ingredient. Perhaps he expects his readers to just nod their heads in
unison when he writes this way, and perhaps most of them do as expected. But such
throw-away lines come under the microscope here.

Now, there is a sense in which Austro-libertarians deny that disjunction: the moral quality of an action does not depend on
whether State personnel engage in it. If A may not steal, then B may not steal,
not even if B claims he’s ordained by God to steal. Not even if A and C, and D,
and . . . n buy B’s claim to have the right to pick their pockets.

But that is probably not Mr. Ferrara’s
point. He says he looks to the limited liability corporation for the source of televised
moral degeneracy (among other species). If only agents of the “public”—preferably
Catholics—would subject the “private” to moral constraint! But would Catholics
get to do the subjecting? (Should they even want to, in the light of Matt. 20:25?) And
since that has been tried before, one hopes that Mr. Ferrara would tell us why things
would be different the next time. (We charitably assume he does not think the last time left nothing to be desired.)

The non-secular
State of yore, after all, the one whose personnel often professed Christ with
their lips and betrayed Him with their deeds—no shortage of that discrepancy
today!—has at least an ambiguous record on this score. The professedly Christian
monarchs and princes of those confessional states may have been restrained in
their behavior, but we suspect that their comparative restraint was mostly a function of technological limitations.

Mr. Ferrara does not, at least here, essay an account of the role of philosophical
ideas in moral decline, but it is hardly obvious that there is a simple
answer to the question of why his late, lamented Christendom fell apart, with the help of both friend and foe. The Protestant revolt? Against what was it in revolt?
The scientific revolution? What role did the Church's favoring of mechanism over Aristotelianism and hermeticism play in that episode?

Mr. Ferrara will not go
there. He’s content to blame the LLC. Or the Enlightenment. Or greed, as the
sign-wielding bipeds near Wall Street bleat. And this is supposed to pass for Catholic social analysis.

About This Blog

We defend Austro-libertarianism, both per se and as an option for Catholics, against the misrepresentation of Christopher A. Ferrara's, The Church and the Libertarian: A Defense of the Catholic Church's Teaching on Man, Economy, and State (Forest Lake, MN: The Remnant Press, 2010. iii+383 pp. Foreword by John C. Médaille.) In these posts the book will be referred to as TCATL. Numbers in parenthesis refer to the page(s) quoted from.

Our intended audience consists of

(a) those favorably disposed toward Mr. Ferrara's position, but whose integrity leads them to wonder what might be said against it;

(b) promoters of TCATL, especially certain Catholic academic reviewers of TCATL—for whom the prescription "charity in all things" should have special meaning—but who apparently have forgotten whatever they once may have known about standards of evidence, charitable construction of one's adversary's position, and other elements of the ethics of discourse. If they are satisfied that we have invalidated its evidence and exposed its disgraceful conduct of controversy, we hope they will be moved to retract their ill-considered endorsements of TCATL; and

(c) Austro-libertarians, Catholic or not, who are curious about this book-length attack on their beliefs.

When ancestors of portions of TCATL had appeared ina Catholic newspaper some years ago, we hoped more accomplished Austro-libertarian Catholics would reply. When we approached them about doing so, however, they advised us that that was a waste of time, ours no less than theirs. We are not certain they were wrong.

Apart from this review, promised years ago if the author would herd his farrago of complaints into a book, it is unlikely that the people he’d prefer to engage him in debate will do so. Our exposure of his exercise in illiberal propaganda constitutes probably the closest, if not the only, attention it will get from this side of the fence. On its merits, it deserves a one-sentence dismissal.

We thank the Remnant Press for the review copy they sent upon request, which we defaced with multi-colored highlighters in preparation for this review.

We speak only for ourselves and not for Tom Woods, Jeff Tucker, Lew Rockwell, or any other Austro-libertarian Catholic.